'India has the potential to address one-third of global ITES business'

WITH global opportunity for ITES projected at US$ 611.4 billion by 2005 and given the growth rate of the industry in the country, India has the potential to address more than a third of the market, so feels Mr. Ashok Soota, President of the Confederation of Indian Industry (CII). In an exclusive interview with Amitabha Sen he said India has to develop a pool of talent conversant with languages other than English. Countries like Ireland and Netherlands would have established domain specialization which will take India a few years more to develop, he pointed out.

AS: India has registered an impressive 70-75 percent growth in ITES business in last one year. How long do you think this upswing will continue and to sustain this trend or to register even a higher growth what the Indian ITES sector should think about?

AS: India is emerging as a favoured destination worldwide for IT enabled services. The country has the potential of becoming the processing centre for the world. With global opportunity for ITES projected at US$ 611.4 billion by 2005 and given the growth rate of the industry in the country, India has the potential to address more than a third of the market. It is estimated that approximately 100,000 people are employed in the Indian IT enabled services industry and the number is projected to reach 1.1 million by 2008.

Accordingly, there is every reason to believe that the growth wave has only just begun and can continue for several years.

The major drivers for growth of this industry are Quality of service, cost reduction and process efficiency. If these factors are kept at world-class levels, growth will accelerate even further.

AS: India's major contenders in this sector seem to be Ireland, Philippines, China, and the Netherlands among others. Which are the areas where it's Advantage India and areas where that call Indian ITES companies to pull up their socks?

AS: The key areas of strength for India as a location for IT enabled services include people skills, cost advantage and fiscal incentives offered to the industry.

India's success in software services is also a plus factor over the other countries for growth of ITES. Managers are already familiar with doing business in India and there is synergy in the two segments of the industry. Processes for outsourcing have been streamlined over the years.

India's English speaking graduate pool is not only the largest, but also the most cost effective compared to any of the countries mentioned.

The range of service offerings from India is also the widest.

Where India lags behind other countries is in a pool of talent conversant with languages other than English; physical infrastructure including areas like power. Finally, countries like Ireland and Netherlands would have established domain specialization which will take India a few years more to develop.

AS: Nasscom forecast ITES revenues to zoom to US$ 17 billion or Rs. 81,000 crore by 2008 from US$ 1.46 or Rs. 7100 crore in 2001-02. In other words, India's share in global ITES market by this time is expected to be over 10 percent. The employment potential is estimated at 1.5 million. Do you think this is an achievable target? If so, what could be the basic reasons that prompt one to come to arrive at such an ambitious target? Besides what the Indian IETS sector, you think, should do to attain this target?

AS: As mentioned earlier, the Global market for BPO and ITES is expected to be around US $ 611 billion by 2005 and India has the potential to address a majority of this market. India is working extensively towards it.

Continuous enlargement of the talent pool through education and training will be a key factor. This will ensure that there is no adverse demand-supply gap for talent and also ensure that costs remain under control.

India must also step up its marketing efforts and address the weaknesses mentioned above to open up new markets.

CII is working closely with the Government and the Industry on all these fronts and results are forthcoming.

AS: Business Process Outsourcing (BPO) is emerging as a major growth contributor to the ITES sector's overall growth. How do look at the prospects of this segment? What would be your suggestions to the Indian companies operating in BPO segment not only to consolidate but also to expand their business?

AS: This is one of the most exciting segments within ITES. Some of the major Indian IT service providers are designing and introducing expanded services to the marketplace in the BPO area. Some providers have partnered with international BPO firms while others are developing their own capabilities. Some of the value added service offerings will be in HR services, finance and accounting services, indirect procurement services, and shipping and logistics. Claims Processing and billing for particular vertical industries like insurance and health care are projected to be the growth drivers.

The most important action for Indian companies in this area is a vertical industry focus and domain specialization. BPO represents the high end of the value chain in ITES and, therefore, industry knowledge including consulting capability will be key drivers for growth.

AS: In next 3-4 years, it is expected 10-20 world-class players would enter Indian BPO segment. What is the scope of joint ventures? What message, according to you, entry of leading global players gives to the Indian players in the field?

AS: This is a very welcome development. CII is supportive of a competitive environment which will enhance efficiency of the industry.

The entry of global players will incentivise Indian players to further enhance their competitiveness.

The concept of joint ventures for development of this sector is very welcome as a business model. The JVs can be with end users who see the Business Processes as their crown jewels and will be more comfortable outsourcing them to a JV partner. JVs can also be with specialized companies which bring in domain knowledge not available in India.

AS: Global economy is largely influenced by the US economy trends. On the other hand, continuous US war threat to Iraq is causing serious concern. Against this backdrop, how you rate the near-future prospects of Indian ITES sector?

AS: I agree that global economy is influenced by US economy trends and to that extent, the war clouds over the Gulf are casting a shadow. However difficult times are also times for companies to take difficult decisions. The US companies faced with cost pressures might look at more outsourcing to India. This will have a positive impact on the prospects of Indian ITES sector. Certainly, we have not seen a short-term slowdown caused by war anxieties.


February 26, 2003


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